Banks Need To Target Small Businesses For Online Payment

In the next one to three years, banks plan to support online payment processes for small and medium sized businesses.

Banks are failing to provide the online payments capabilities that small businesses desire, according to a survey by MineralTree, a software company that provides online payments solutions to banks. The survey, “Small Business Banking Report: SMBs Still Paying with Paper – And Begging Banks for a Better Way,” found that the majority of small and medium businesses continue to use paper checks to pay for bills, while 70% of say they want to eliminate the process and go paperless.

Eliminating the need to write paper checks interested 68% of small businesses and 89% of small businesses that use accounting software.

Previous research released this year by MineralTree indicated that banks have a growing interest in attracting small business customers, with 88% of banks in a survey saying they plan to target small businesses in the next one to three years.

However, many of the banks in that survey said that they weren’t meeting the payments needs of their small business customers, with only 35% of them claiming that they are doing a good job in meeting payment needs for small and medium sized businesses.

The new research shows that banks are missing out on the opportunity to attract small businesses by failing to meet their payments needs. Seventy-two percent of small and medium sized businesses in the new survey responded that they were handling booking internally and only 9% are using online bill payments.

According to the report, “small business leaders are focused on running their businesses, and look to trust vendors, like their banks to suggest innovative news approaches.”

The survey of 300 small and medium-sized businesses was conducted this past September by MineralTree and Bredin, a sales and marketing B2B agency.

Zarna Patel is a staff writer for InformationWeek's Financial Services brands, which include Bank Systems & Technology, Insurance & Technology and Wall Street & Technology. She received her B.A. in English and journalism from Rutgers University College of Arts and Sciences in ... View Full Bio

I've seen other research before that showed the same trend in small business payments - and overwhelming majority of them are made in checks, even though the small businesses would like other online/mobile payments capabilities. So yes MineralTree has a vested interest here, but they are not the only one seeing this issue or trying to address it. As I mentioned in my comment above a lot of mobile RDC vendors are going after the small business market because they see an opportunity with all of those checks. And I've seen survey data that suggests that small businesses would be more willing to pay a small fee for mobile check deposit than consumers are.

My understanding is that small businesses need/use many of the same kinds of services and products as consumers, so it is somewhat surprising that banks haven't extrapolated the success of mobile in retail banking for the small business segment. That said, we know that banks are not driving the agenda on mobile payments so maybe this is an aspect of that trend. Also, obviously MineralTree has a bit of a vested interest in trying to create more awareness of opportunities to invest in mobile payments capabilities. That said, the findings of this research suggest there is tremendous opportunity to make relationships with SMBs much more comprehensive and potentially revenue generating.

When you talk to contractors, most of them live on their phone. They are out with their clients 10-12 hours a day, or driving between different jobs. It makes perfect sense to provide them with small business mobile capabilities so they can accomplish more when they are away from their computer (which is most of the time).

Another potential area for banks to better reach their small business offerings is in business mobile banking services. Large companies usually have a team of accounts payable people taking care of payments, but small business owners often need to approve payments or transfers on the go. This helps eliminate paper further and banks can improve the "stickiness" of these customers with such convenient offerings.